Estonia Approves Gas Separation Law
The Estonian cabinet has today approved a new draft law which aims to separate the supply and distribution of natural gas by 2015, as per an EU directive.
The decision will mean that Estonian natural gas company Eesti Gaas will be forced to separate itself from gas sales at the same time as it is distributing gas. The EU directive on which the law is based aims to increase competition in the market and discourage monopolisation of energy supply and sales.
Under the law, disconnection of the two facets of supply and distribution will take place in two stages. Eesti Gaas will be required to create a gas distribution company by January 2013. By 2015, the company must not have any ownership in this separate distribution company. The company will face a penalty of a fine if it fails to hand over ownership of the distribution company by the 2015 deadline.
The Estonian Ministry of Economic Affairs and Communications, who announced the change to the law, says that the move will help to open up the gas market in Estonia and encourage competition in the market as well as enable the country to adhere to EU legislation.
Separating the distribution and sale of gas will open the door to new suppliers, weakening the country's dependence on gas from its biggest supplier, Russian Gazprom. Gazprom is the largest stakeholder in Eesti Gaas at 37.02 per cent. E.ON Ruhrgas holds a 33.66 per cent stake with Fortum Oyj holding a 17.72 per cent stake and Itera Latvija a 9.85 per cent stake.
Competition remains a contentious issue in the Estonian market, despite the efforts to divest the gas and distribution networks of the country.
Earlier this week, Eesti Gaas and Finnish gas supplier Gasum Oy announced that they had signed a Memorandum of Understanding to create a natural gas exchange in the Estonian market.
However, chairman of Estonian power grid operator Elering, Taavi Veskimägi, says that the exchange may deepen monopoly in the market.
"The gas exchange in essence is not a bad thing if it is set up on the basis of the law, acts under the supervision of a regulator and is the partner of an independent system director," Estonian public broadcaster ERR reports him as saying. But if the exchange is set up [...] by the same [company] that is the sole supplier of gas, then the creation of such an exchange will only deepen the distortion of the gas market in Estonia and lead to further concentration of the market."